Greece is Bigger than Greece!…Go For Gold !

Greece is bigger than Greece !…..it’s not a liquidity issue…it’s a big solvency problem!…and no amount of stimulus can solve a solvency problem !

The debt and deficit figures of several countries indicate doomsday scenarios across Europe…PIGS nations are in HUGE trouble…Portugal,Ireland,Italy,Iceland,Greece and Spain…are facing a doomsday scenario

GROSS EXTERNAL DEBT (GED) AS A MULTIPLE OF GROSS DOMESTIC PRODUCT (GDP) ( In US $ Billions)

(Base Figures Sourced from IMF and reworked on for current estimates)

 

PIGS in Europe

Estimated GED in 2010

Projectedd GDP in 2010

GED over GDP

Portugal

600

226

2.65

Iceland

125

12.5

10

Ireland

2400

216

11

Italy

1400

2121

0.66

Greece

600

325

1.85

Spain

3000

1424

2.11

In Comparison

INDIA

 

251

 

1500

 

0.17

Seems only Italy,among the PIGS has External Debt at lower levels than it’s GDP….debts of others are horrifyingly several times over their GDP and they have poor Fx reserves too….India,on the other hand,is growing at 7% +,has US $ 280 billion Fx Reserves and the GED/GDP is very comfortable at 0.17 

Greece has to implement severe austerity measures to cut down it’s deficit to 3% of GDP inside two years if they want to receive the US $ 146 billion bailout package over the next three years announced by the IMF  with major support from Germany…all PIGS nations have deficits running over 10% of GDP….this would mean drastic cut down in Government Expenditure and absolutely no chance of any Stimulus package….+ an increase in taxes…..the chances of Greece actually complying with this are very slim….It’s citizens have started to actually riot !…for decades the Greeks were assured by the Government that the economy was alright and they would continue to print currency and borrow to fund spending and create and assure Jobs….when the creditors began tightening their calls in September last year,the real tough situation in Greece began to reveal itself and the nakedness became apparent…The Greeks are going to get poorer literally overnight and this traumatic situation is manifesting in Violence…… I’m inclined to agree with Paul Krugman,the Nobel Prize Winner for Economics in 2008 that the only solution is that Greece move away from the Euro to it’s own currency and begin an Export led Stimulus to Recovery….Problem is that the moment they announce this there will be a major run on the banks !   

Many European nations are facing doomsday scenario….and I fear UK and USA seem to have merely deferred their troubles…their statistics are even more deafening on scale 

Therefore I reiterate GO FOR GOLD…Read all my blogs in the category of Gold and Silver…I have been strongly advocating strong and increasing allocation for the past few years to GOLD right when it was @ US $ 650 /oz levels….The first scenario painted by me was US $ 1000/oz…we hit this in 2009….Then Beginning 2010 I had said Gold will cross US $ 1200/oz this year…it already has!…believe me,Gold will cross US $ 2500 in the next few years and even move towards US $ 5000/oz

 

GOLD…..that’s because I see the US Dollar and Euro collapsing….Euro is already orphaned

Watch me on TV at 8.30 am on ‘Money Plant’ this Saturday,May 15,2010 on Doordarshan National Channel….It’s on Channel 14 for those who have Hathaway in Mumbai…The half an hour program is on Forex and Investment Opportunities and I’m commenting on

  • The relationship between Interest Rate,Inflation Rate and Exchange Rate
  • Chinese Yuan as the replacement Standard Currency for the US Dollar…why it will not happen in the short term atleast
  • Euro has been orphaned…It was quoted at 1.32 against the Dollar when the program was recorded last week…it’s dropped to 1.25 fast inside a week !…1.15 is the next target
  • Deregulation Reforms in the Forex market
  • Investment Opportunities Opening Out to Individual Indians to Hold a Global Portfolio
  • Significance of REER and NEER

Wander how the Greek Philosophers Socrates,Aristotle and Plato would have sermoned out their advice to save Greece….Cheers !

 

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